New face for old landmark

By THE EDGE

It is a tired 34-year-old office building in the heart of Kuala Lumpur's Golden Triangle. But its owners knew its location made it the right piece of property to be tapped to its full potential.

With just a few more floors of the 22-storey building to be refurbished, Menara Hap Seng Sdn Bhd — the owners of Menara Hap Seng — is excited about unveiling the RM60-million makeover of the former MUI Plaza on Jalan P Ramlee by year-end.

Menara Hap Seng Sdn Bhd is a wholly owned subsidiary of Main Board-listed Hap Seng Consolidated Bhd, which had bought the building together with an adjacent piece of land in 2004.

Property development is one of Hap Seng Consolidated's core businesses. The group is among Sabah's largest developers of townships and mixed landed developments. Its current projects in East Malaysia include Taman Kingfisher Sulaman in Kota Kinabalu, Bandar Sri Perdana in Lahad Datu, Astana Heights in Sandakan, Taman Miramas in Semporna and Bandar Sri Indah in Tawau. Menara Hap Seng marks its entry into the Klang Valley property market.

The once-grey building now sports sleek contemporary features and fittings and is envisioned to become a landmark Grade A office building in the Golden Triangle. Located opposite Shangri-la Hotel and behind Menara Weld, it is within walking distance of KLCC.

Many, even KL-lites, may not know this but the building was originally designed as a hotel, reveals Datuk Paul Ng, the chief executive of Hap Seng Land's property division.

This inspired the new owners to leverage on the building's unique design in its refurbishment plans, giving the office building the feel of a modern city hotel.

"For an office building, the design is rather peculiar. You will notice the long driveway and the systematic window grid, which are characteristics of a hotel. While researching the building's history, I found out that it was originally designed to house the former KL Hilton but for some reason that did not work out," says Ng.

The first three floors of the building will now be the retail podium of Menara Hap Seng, comprising a grand lobby, lounge areas, cafés and restaurants offering moderate to fine dining, and speciality stores. "This is where business meets leisure," says Ng.

To emphasise the "hotel" features of the building, the landlord will introduce services often found at a hotel lobby and entrance, such as valets and concierge service. There will even be a doorman to greet you as you walk in. About 75% of the building has already been leased out, with many of the tenants scheduled to come in once the refurbishment is completed. More offices will be open for lease then. The tenants include Maybank, CIMB, Mitsui-Sumitomo Insurance, The Korean Trade and Investment Agency and Borneo Oil & Gas Sdn Bhd. Those that were there before the new owners took over make up about 30% of present tenants.

"We are selective about our tenants because we want those who will utilise the facilities that we have here," Ng says, adding that the group wanted to offer Grade A offices in a prime location because "the demand is there, and also because we can keep them for investment".

One floor will be dedicated to serviced offices while the top five floors of the building will house the group's headquarters, which are currently in Petaling Jaya. Other facilities include high-speed elevators, spacious corridors and foyers, quality finishing, a modern building control system, 24-hour security and controlled access.

Chanced buy
According to Ng, Hap Seng acquired the building in 2004 by chance. "One of Hap Seng's businesses is selling Mercedes cars. (The group is the authorised dealer for Mercedes-Benz and Smart vehicles in Peninsular Malaysia).

"We were looking for a suitable site for our Mercedes showroom in KL and found this vacant lot. It so happened that the owner of the vacant lot owned the building (MUI Plaza) next door. So we thought, 'why not kill two birds with one stone and buy both the properties since it is under the same owner?' So we went knocking on the owners' door and persuaded them to sell the building as well. So we ended up buying two properties instead of one."

Hap Seng's impressive Mercedes-Benz Autohaus showroom is now located on a 31,000 sq ft site at the intersection of Jalan Sultan Ismail and Jalan P Ramlee, with Menara Hap Seng next door.

"At the time, we paid RM166 million for the building or around RM480 psf, a price one would have considered rather steep then. But we still went for it," says Ng.

Why? "As a property developer, one must have an eye for potential and visualise the opportunities. You must have the gut feel when it comes to investments and we had the gut feel for this property. And we believe it was the right decision and the money we paid for it has been worth it. It did not seem like a good buy at the time but on reflection, it is a good buy because today, the speculative pricing per sq ft, I would say, is almost RM800 psf," he adds.

Ng has 25 years of experience in the industry, with a background in architecture and property consultancy.
According to him, in 2004, the rental rate for MUI Plaza was around RM3.20 psf. Today, the rates for Menara Hap Seng range from RM4.70 to RM5 psf. "The rate for our next release of office space, which will be when the refurbishment is completed, will probably be around RM5.50 psf," he offers.

Each floor has a space of 13,000 sq ft and the minimum space for lease is 900 sq ft. The rental for the retail lots at the three-level retail podium ranges from RM5 to RM15 psf.

Mass housing
In Sabah, Hap Seng is known as a township and mass-housing developer, particularly in Tawau where it developed its first project. Among its townships is Bandar Sri Indah, which is 10 miles outside Tawau. It is the largest commercial-residential township develoment in Sabah, covering 1,368 acres. The total development consists of over 8,300 homes, 700 shoplots and 550 industrial lots. It also has amenities such as schools, a bus terminal, government departments, a market and a 300-acre ecopark.

Hap Seng has also built affordable housing in Sandakan, Kota Kinabalu and Lahad Datu. To date, it has erected over 8,000 mixed types of properties in excess of RM1 billion and still has more than 2,000 acres of undeveloped land.

However, the group realised that the property action was in West Malaysia, especially in the Klang Valley. It thus started scouting for opportunities to build or rebuild niche properties in strategic locations here. "We have developed our brand in Sabah but it is West Malaysia that has the potential for greater things for us.

"In KL, we want to focus on niche developments such as high-end condominiums and commercial buildings and towards this end, we are busy looking for land and good investment buildings," Ng says.

The developer is in the midst of completing the purchase of three vacant lots, one on Jalan Tun Razak and two on Jalan Kelang Lama. "When developed, we expect the total gross development value (GDV) for the three projects to be more than RM600 million," Ng discloses.

"We are a new developer here on an acquisition trail. We believe our strategy to acquire more land or old properties with potential for redevelopment must be based on prime locations and we don't mind paying top dollar for it. Location is very important for investment," he says, revealing the developer's deep pockets.

However, he adds, property owners are holding back from selling, in anticipation of price increases in the near future.

Puchong development
Besides Menara Hap Seng, the group hopes to launch its 88-acre D'Alpinia development in Puchong by year-end. The development comprises 76 acres of residential homes made up of superlinks, detached and semi-detached houses priced from RM300,000 to RM1 million plus, and 12 acres of commercial development. The total GDV is expected to be more than RM500 million.

"Unlike in Sabah, the KL market expects a lot more, so we have to provide a lot more. Things like auto gates, CCTV security systems, filtered water systems, all these will be standard features in our D'Alpinia homes because purchasers today consider these items as essentials in a home. Most of the time, they have to renovate and add these features on their own but with our homes, they probably won't have to," says Ng.

There was strong response to a pre-registration exercise for D'Alpinia's Phase 1A of 154 units. "There were 1,500 registrants when our whole project, when completed, will offer only 1,000 odd units. It looks like our reputation in Sabah has preceded us," Ng says.

Besides property investment and development, Hap Seng Consolidated is involved in credit financing, trading (fertilisers, automotive, building materials and petroleum), stone quarries and plantations. The group is one of the largest oil palm plantation companies in Sabah, with a total planted area of about 32,700ha. The group plans to list its plantation assets by year-end.

As at Jan 31, 2007, Hap Seng's paid-up capital stood at RM622.66 million while shareholders' funds stood at RM1.53 billion. For FY2007 ended Jan 31, it registered a profit after tax of RM121 million on a turnover of RM1.7 billion.